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US Shale Boom May Kill The Electric Car

David Booth, National Post

As the fear of massive price fluctuations and oil blockades fade, it may become increasingly difficult to convince Americans to trade in their pickups for some electric weeniemobile.

When the Obama administration unveiled its new 54.5 miles per U.S. gallon (23 kilometres per litre) Corporate Average Fuel Economy (CAFE) regulations back in August, its most effective argument for the hyper-aggressive mandate was not that the United States would use two million fewer barrels of oil a day or even that emissions would be reduced by six billion tonnes by 2025, but rather that the average driver would save as much as $8,000 in fuel costs over the lifetime of his or her new vehicle.

Indeed, the U.S. National Highway Traffic Safety Administration (NHTSA) proved most adept at promoting the new standards, claiming that switching to newly frugal sedans and trucks would be the equivalent of a dollar a gallon reduction in the price of gas, tapping into the widespread obsession with the price of fuel. Even the most dedicated enviroweenie realizes that, if the automotive revolution — EVs, hybrids and four-cylinder econoboxes — that they have been promising is really to occur, it will be promoted on pump prices, not saving the environment.

The problem is that, in the U.S. at least, the window of opportunity for convincing consumers that more economical transportation is a necessity may be closing. If reports of the U.S.’s increasing supply of home-brewed fossil fuels are to be believed, the country could soon become the largest oil-producing nation in the world and wean itself from much of its foreign oil imports by the middle of the next decade. While there are all manner of caveats to that prediction — shale oil deposits in the Bakken region of Montana and North Dakota (not to mention Saskatchewan) proving as large and easily accessible as expected, etc. — it is nonetheless a game-changing prediction.

Our predilection with the price of gas (and who among us doesn’t have a parental unit, usually dear old pater, for whom shopping for cheap gas is an obsession only slightly less important than the health of their grandchildren) is a recent one, dating specifically to 1973, when the first oil crisis hit the U.S. Before that fateful October, fossil fuels were something to be squandered freely in the biggest, least efficient land yacht one could afford. Economy cars were limited to the Volkswagen Beetle and the quaint little Toyotas that were just staring to appear on North American shores.

By June of the following year, when pump prices had spiked by 50% and president Richard Nixon began talking gasoline rationing, the fear of oil shortages had permanently scarred America. Long lineups at filling stations became the norm, the U.S. got its first “energy czar” — William E. Simon, Administrator of the Federal Energy Office — and the previously unheard-of OPEC (Organization of Petroleum Exporting Countries) became as familiar to fretful Americans as the birthdays of their children. By the time the second oil crisis hit in 1979, the fear of oil shortages had been etched — permanently, we have long thought — into the collective consciousness. Subsequent theories such as “peak oil” led all of us to believe that a permanent oil shortage was just a Middle Eastern crisis away.

Yet, 40 years later, the news that we might now all have to get used to is of an American oil boom, one sufficiently robust that it threatens the oil exports that are the lifeblood of Alberta’s economy. And even though the expansion of oil exploration in the United States and the continuing development of our Athabaska oil sands will not prevent the inexorable rise of oil prices — China’s demand will see to that — a repeat of dramatic oil shortages and calamitous price spikes seem increasingly unlikely.

Both, I would posit, are actually necessary if alternative and fuel-efficient vehicles are to gain more than their current toehold in North America. The history of hybrid sales in Canada and the U.S. closely reflects the cost of gasoline. Every time there’s a significant spike in pump prices, hybrid sales boom, only to then drop off when the fear of further escalation fades. Indeed, it would appear that, while North Americans like to constantly complain about fuel economy, they only alter their purchasing patterns in response to severe price hikes. Electric vehicle protagonists, now predicting sales will take off when pump prices finally reach some currently unthinkable price such as $2 or $2.50 a litre, may be disappointed if, when the increases are gradual and predictable, there is no dramatic retreat from the internal combustion engine.

As the fear of massive price fluctuations and Saudi blockades fade, it may become increasingly difficult to convince Americans to trade in their pickups for some electric weeniemobile. With the increasing public acceptance that another oil calamity is not right around the corner, so too will the popularity of draconian fuel economy regulations. I think the alternative vehicle lobby’s window of opportunity to solidify the electric automobiles into the consuming public’s consciousness is limited. Without the fear of price hikes and oil shortages to motivate people into smaller and more fuel-efficient cars, selling alternative vehicles on their environmental advantage alone could prove very difficult.

National Post, 1 December 2012